A R5 coin is worth R5 – unless you believe the sales pitch that it’s a “rare” Mandela R5 coin. The truth is, millions of these coins were churned out by the South African Mint. So why would anyone then buy it as a “collector’s item”, or even an investment?

In an interview with ­Classic FM last month, Mark Ander­sen, chief executive of SA Coin Corporation, described the coin market as such: “There are two types of coins on the market: bullion and rare coins. A bullion coin is valued at its metal content that will sell by its weight – an ounce of platinum, gold or silver. It can only sell at its metal price. In terms of collecting, they are not rare.

“A rare coin has to be a currency coin: a coin that you can buy something with.

“A collector and investor is looking for the highest specimens of any coin… Freshly minted coins are sent off to one of three of the largest grading companies in the world… They grade the coin on a 10-point scale from mint state 60 to mint state 70 (the highest). If you have an MS70, and if it remained at a population of one, that would be a rare coin. The rest come in at lower grades…

“With the Mandela coins, they minted many, but only a few are highly graded. Those are rare and sought-after. There are only six R5 Mandela coins that you can collect, they were minted in 1994, in proof and uncirculated; 2000 and the same in 2008. If you put those aside, over time they will increase in value.

“If you called the NGC (Numismatic Guaranty Corporation of America) and asked if the Mandela coins were valuable, they’d say yes – in high grades. Our goal is to market these internationally.”

So I did, and Liza Berzins Goolsby from the NGC’s customer service department informed me: “The NGC only grades coins. We do not buy, sell, trade or value them.”

Despite abundant complaints about off-loading these coins, Andersen blames the market. “Rare coins do unfortunately follow the market. If you’ve got a domestic economy that’s so challenged, there’s very little that will stand up to current conditions. Rare coins (have dropped in value in the past six months) – across the board.

“The great thing about coins is there’s no tax. So if you make a million rand profit on coins, there is no tax. On Krugerrands, you will make a profit. There is tax on a sale, but they’re a great investment – never a bad idea to ferret away some of those. Six months ago, they were selling at R15 000 a unit; they’re now R20 000.

“Rare coins traditionally perform better than gold, but you don’t have the kind of ­liquidity and you won’t be able to sell it as quickly as a ­Krugerrand.”

But, he said, some Mandela R5s weren’t such sound investments: “The MS66, there are over 140 000 and they are part of the rare coin market, but they are common.”

Yet his website, which is seemingly devoted to the Mandela R5s, talks up the market, bragging: “The rare R5 Mandela coins are the easiest rare coins to sell in the world. More and more companies and individuals are finding how easy it is to market the rare Mandela coins and so that factor alone is a constant that expands the market at a more rapid rate than any other coin market in the world,” it says.

“Rare coins just get more and more rare with the passage of time and their values just get larger and larger. The rare Mandela coins will therefore continue to expand and get larger and larger until the end of time.”

And then comes the disclaimer: “While every precaution is taken to ensure the accuracy and the soundness of the material contained within this website, no liability whatsoever and howsoever arising shall vest in The South African Coin Corporation (Pty) Ltd as a result of any error and/or inaccuracy and/or information and/or recommendations given from any matter contained on this site.”

Scarcity might have been a selling point at some stage, but now the market is flooded – and gullible buyers are realising their R5 Mandela coins are worth simply R5 apiece.

There have been numerous reports about the Mandela coins over the years, but this past week, two customers, Cyprian Richards from Gallo Manor and Karl Botha from Port Elizabeth, contacted me about burning their fingers badly. They warned people to stay away from them.

Both were verbally assured the coins would appreciate, provided they kept them for at least five years, but then they came to the conclusion the market had bottomed out.

Richards wanted to offload some of his collection: “An SA Coin salesman (who I later discovered was about to leave the company) met me to discuss improving my investment portfolio. He used every ploy in the book to assure me the value would sky-rocket in the event of Mandela’s passing.

“He mentioned they would at least double in value. His view was this was one of those rare opportunities to make a killing and I would kick myself if I didn’t purchase these coins.

“He promised if that didn’t happen, he would repay me in January what I had paid. The chief executive, Mark Anderson, spent 25 minutes with me in the office, confirming everything the salesman said.”

Richards hadn’t recorded that conversation, nor does he have any of the transactions in writing, but he has other proof.

“The value of my coins was in excess of R400 000. His company offered me R325 000 for the balance, which was supposed to be equal in value to the outstanding amount and would soon double in value. Their 2012/13 brochure predicted astronomical rates of appreciation (so one can argue they provided me with implied guarantees). From the time I received the coins up until now, I have never been offered more than R30 from coin dealers in Johannesburg. So effectively I have never received my money for the coin collection – which is tantamount to fraud.

“Recently, Andersen has suggested this is because of the country’s poor economic situation. He never mentioned this aspect before, and certainly not while the coins were being purchased. He maintains his bullish outlook, even when every indication suggested the opposite economic scenario. In spite of the generally negative economic outlook, he has always claimed this coin would sell for a minimum of R450 000. I was in fact duped into spending R1 250 000 on four coins. As the saying goes – too good to be true is too good to be true!

“I was shocked to read in their January 2015 ‘newsletter’, authored by Andersen, where he boasted about selling a R5 Mandela Coin for R600 000 – I own that very coin! It has the exact same serial number as the coin portrayed in the article. There is no doubt this is the very coin I was conned into buying in December 2013, when Mandela was very ill. People have been taken for a ride by this company,” he warned.

Richards attached a copy of a letter of complaint to The Star titled “Bid to make a mint from Mandela” from an Andrew Brand, noting how an SA Coin staffer had sent him unsolicited marketing material in which she wrote: “We all know Mandela is on life-support… coins are likened unto a painting – when the artist dies, the painting becomes more valuable”; links to articles about the coins; sales projections; and proof “his” coin was apparently sold – when in fact, it was in London, in his brother’s safekeeping.

Karl Botha was similarly stung: more than five years ago, he bought five R5s for R30 500, being told they would appreciate. When it came time to cash in on his “investment”, no one was prepared to buy the coins and SA Coin at first wasn’t interested either because there wasn’t a market for them – then the company tried to upsell.

“In (an attachment) you’ll see the projected prices SA Coin gives for the R5 coin. No R5 coin has ever been sold for anywhere near that price. The most you can expect from these coins is R55, which constitutes the price they paid the SA Mint for the coin and the cost of having them graded,” he said. 

“They now want me to spend R5 000 to swop for proof (not released to the public) coins and send them back the MS66 and 67 coins I bought more than five years ago. They might have been worth more in the past, but now everyone has had them graded so the market is completely saturated – they don’t even sell what I bought any more. I subsequently found out 45 million of these coins were minted. When I accused them of theft, Andersen called me a retard. They lied about the coins appreciating and now I am sitting like an idiot with five R5 coins which I paid R30 500 for, worth about R25.”

Peter Wilson, an independent collector who heads the National Association of Numismatic Societies, agreed the market was flooded: “The biggest problem in numismatics is the Mandela R5 coin. That’s where the bulk of the rip-off is occurring. These guys (the sellers) are doing immeasurable damage to the noble hobby of numismatics,” he said.

Glenn Schoeman, president of the SA Association of Numismatic Dealers, told me: “A client phoned me and said he had struck a bargain. He had been offered 50 NGC-graded MS66 Nelson Mandelas. The seller only wanted R25 000 apiece. The guy told me they were worth R40 000 each.

“I asked him: ‘How rare can they be? The guy is offering you 50 of them!’”

It all comes down to he said, she said – promises were made and not recorded; buyers got caught up in the frenzy of the sales pitch; the company says it cannot provide a market for the goods, nor did it undertake to buy back any coins. Yet, despite the fact there’s no market for the coins, the company certainly creates the impression these “rare” coins were the buy of the century. Is it a scam?

You be the judge. Particularly in light of Andersen’s claim that “the rare Mandela coins” are the “fastest-appreciating rare coins in the history of the world”. Hardly.

Note: Andersen declined to comment.

...

Wise up - here's how

GOLD STANDARD: The sentimental value attached to Krugerrand is understandable: they’re not only a good hedge against uncertainty, but they can be passed onto future generations and appreciate in value.

But Scott A Travers, a US gold and rare coin expert, writes in “10 myths of the modern coin market” that gold coins are not always a better investment than silver or nickel.

“Many new collectors, as well as many investors entering the coin market, are convinced all that glitters is indeed gold. They assume that being more valuable, gold coins are inevitably more desirable as well. But gold coins can go down in value just as surely as any other kind. Your best bet is to stick with the highest-quality coins you can afford, regardless of their metallic composition or intrinsic value.”

SHOP AROUND: Don’t buy from the first dealer you come across. Check prices online and in reputable coin publications. If a dealer’s price is much lower than the prices listed, they could be misrepresenting the quality, rarity or grade of the coin.

PROMISES, PROMISES: Don’t be fooled by promises that a dealer will buy back your coins at any price – or that the grading is guaranteed. If they say they will buy back, get it in writing or record it. It’s important to note that grading can and does change.

AND FINALLY... Be wary of the “get-rich-quick” scheme, the “too-good-to-be-true”, “once-in-a-lifetime” spin. Treat claims of low investment, high returns with a healthy dose of scepticism because that silken-tongued salesman probably won’t be around to blame years later, when you’re sitting with a stash of “rare” items that no one else values – or wants to buy.

Remember the Kubus pyramid scheme of the 1980s? Hundreds of South Africans were left with rather vrot milk on their faces. And zero market.